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Analysts forecast bumper Rio interim
Jul 29 16:35
AAP

Rio Tinto's half year net profit result will nearly double the 2004 figure as record commodity prices and high production come together in a "perfect storm", according to resources analysts.

The consensus among analysts is that the mining giant will post a half year net profit before significant items of about $US1.95 billion.

The miner's net profit from ordinary activities for the same period in 2004 was $US993 million, and in 2003 it was $US641 million.

Some mining analysts, like ABN Amro's Robert Clifford are even more bullish about the result, expected to be released on Wednesday.

Mr Clifford said ABN Amro was expecting Rio Tinto's net profit before exceptional items to be $US2.028 billion.

He said the miner had worked hard to ramp up its iron ore production for the second quarter of the year to take advantage of the 71.5 per cent increase in the iron ore contract price.

"They have taken some calculated risks in their rapid expansion of iron ore and it's paid off," he said.

Credit Suisse First Boston is forecasting a net profit before exceptional items of just over $US2 billion and mining analyst Alex Mirkovic says the biggest impact will be from the iron ore division.

Intersuisse resources analyst Gavin Wendt says he is expecting net profit before exceptional items of $1.9 billion.

UBS is also forecasting $US1.9 billion and resources analyst Glyn Lawcock said there would be even better results to come.

"We expect good strong cash generation given the environment we are currently in and even stronger cash generation on the back half of this year because you will get the full effect of the increase in iron ore and coal pricing flowing through," he said.

Mr Lawcock said if the miner was planning any extension to its $1.5 billion buy back he did not think it would be announced until the end of the year.

"At this stage we would expect them to reiterate that their intention is still to return up to $US1.5 billion over two years and I wouldn't be surprised if following the result they perhaps step into the market and start buying," he said.

Analysts said Rio Tinto's healthy production report for the June quarter had guaranteed a strong half year profit result.

The report showed the miner had boosted its iron ore production for the quarter to 32.166 million tonnes, up 16 per cent on the previous quarter.

Rio Tinto produced 190,100 tonnes of copper in the quarter, up 1 per cent on the previous quarter and a record 779,000 tonnes of alumina.

But hard coking coal production was 7 per cent lower than for the same period in 2004, held by back infrastructure bottlenecks in Queensland.

Merrill Lynch said second quarter production had exceeded its forecasts for all items apart from coal.

Merril Lynch is forecasting a $US2.055 billion reported net profit for the half year and has a buy recommendation on Rio Tinto.

Rio Tinto shares closed $1.14 higher at $49.12 today.